Dear Mayor:

The Joint Committee on Employee Benefits met today to explore options for the provision of public pension benefits. Mindful of legal parameters, the Committee held extensive discussions on whether it would be prudent to continue to embrace the present system or adopt another model if it would provide much sought after savings for the State.

It was announced by Co-Chair Nellie Pou the Attorney General issued August 25th opinion in concurrence with the legal opinion provided by OLS last week. That opinion provided that it would be a violation of federal and State constitution to impair or alter retirement benefits of active or retired employees with at least five years of service credit.

Today's discussion began with an overview of NJ Alternate Benefit Program by Division of Pension Director, Fred Beaver. The ABP provides retirement benefits to those in the education community-State colleges and universities, county colleges and the Department of Education. Retirement benefits under ABP are funded by mandatory contributions by employee (5%) and employer (8%). Because it is mandatory, the Legislature has found the discipline to make the contributions under ABP. Also, the employer will match up to 3% additional contribution by the employee. This results in a total cost of 11% which is significantly more than PERS and TPAF. Under ABP, individuals can enroll in PERS, PFRS or TPAF resulting in dual pensions.

The comparison of the Defined Benefit Plan for PERS state employees and TPAF, with a Defined Contribution Plan was presented by the actuarial firm hired by the Division of Pensions. It was concluded, if the State were to establish a defined contribution plan in place of defined benefit plan, it would be more expensive for the State (employer) in the short term (estimated at 10 years) with recognition that over time, savings will accrue to the State in the form of reduced contributions. Interesting to note, under the defined contribution program, the State (employer) is not allowed to grant itself a holiday or miss payments.

There still has been no examination of local programs for PERS and PFRS. The League awaits the opportunity to appear before the joint committee.

For further information, please contact Helen Yeldell at (609) 695-3481 ext. 12 or by email at hyeldell@njslom.com.